Posted on 02 Dec 2008
World economic growth will slow to 1% in 2009 from 2.5% this year as the financial crisis bites and the global economy may even contract if stimulus packages prove too little too late, a UN report said.
The report on World Economic Situation and Prospects 2009, an advance copy of which was issued at a development conference in
Next year’s growth forecasts compare to global growth rates of 3.5% to 4% from 2004–2007 and the report said the economic environment for developing countries had deteriorated sharply after early complacency.
“Most developed economies entered into recession during the second half of 2008, and the economic slowdown has spread to developing countries and the economies in transition,” the report said.
“A large-scale fiscal stimulus co-ordinated among major economies would stave off the worst of the crisis yet ... it would not prevent a significant slowdown of the global economy in 2009.”
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The report urged stronger regulation of financial markets institutions, adequate international liquidity provisioning, an overhaul of the international reserve system and more inclusive global economic governance to prevent future crises.
“The crisis should have taken no one by surprise,” it said. “That analysts and policymakers are now expressing bewilderment at the extent of the crisis suggests not only a gross underestimation of the fundamental causes underlying the crisis but also unfounded faith in the self-regulatory capacity of unfettered financial markets.”
The report said the outflow of capital from emerging to developed economies continued to be larger than the inflow and sovereign wealth funds of emerging markets grew to some US$4 trillion at the end of 2008.
“To ensure sufficient stimulus at the global level, it will be desirable to co-ordinate the fiscal stimulus packages globally,” it said.
